Comments on: The Fairness of Inheritance Tax

By: Fairness, Drugs and the Dole « Bad Conscience

Fairness, Drugs and the Dole « Bad Conscience — Tue, 24 Aug 2010 06:32:03 +0000

[...] were really interested in “fairness”, we would get rid of private schools. We would massively increase inheritance tax rates. We would take measures to reverse the trend – growing since the 1980s – that says if [...]

By: Tasha

Tasha — Thu, 11 Mar 2010 22:42:35 +0000

I am writing this from the perspective of somebody who has been hit by inheritance tax after the loss of my mother in February this year. The only asset of any value she had was her property that I lived in with her. Unfortunately, as with most family homes (excluding flats) within commuting distance from London, this has been valued over the current IHT threshold.

Firstly, in my view the current system makes no allowances for the individual circumstances of those who inherit. Paul – you mentioned IHT is “fairly easy to avoid” but that is only if you know how to avoid it and are prepared for it. Unfortunately, my mother was diagnosed with lung cancer and died less than a year later. All the supposed avoidance tactics were impossible within such a short space of time. We considered selling the property but mum was too ill by that time to go through a major move with all the associated upheavals it would bring.

I was her only child and hence her full-time carer. As you might be aware, family members (or any persons) who are full-time carers only receive a very small allowance of £53.10 per week for what is essentially a 24-hours a day, 7 days-a-week ‘job’. Therefore, this and mum’s disability living allowance were all we had to pay for bills, food and other essentials since my mother could no longer work because of her illness. It was manageable as I have never had a high-paying job but I can assure you that it was difficult, particularly due to the exceptionally cold winter and higher gas bills as we had to keep the house warm all day, every day as mum was house-bound.

So now, after having not worked in order to spend the last 9 months looking after my mum, which I have no regrets about, I am staring at a huge bill that I can’t afford unless I sell the house, which has been my home for my whole life, on top of all the other practical matters that come with a bereavement.

Matje mentioned that most people who inherit are about 40 or 50 years old but I am only 30, so I don’t think you can generalise about the average person who inherits. What about RTA victims, those who die of heart attacks or cancer, or victims who die younger from other accidents or violent crimes?

An option thoughtfully offered by the government is the possibility to pay the tax in instalments over 10 years … but then you have to pay interest on the instalments! This certainly doesn’t make life easier … I haven’t even started to mention the emotional aspect of a bereavement and I am lucky in the sense that I had so long to prepare myself for my mum’s death (although nothing quite prepares you for the shock of losing a loved one).

So I don’t agree that the tax achieves the objective of taxing the rich and distributing it fairly to the poor in ALL cases. I think it has a role to play and shouldn’t be abolished entirely. I agree with Biscuit’s comment that it hits the middle classes hardest but also those people in my circumstances. I feel penalised for simply living in a house that happens to be over the IHT threshold.

Wouldn’t it be fairer for the government to means-test those who inherit property/assets in some way? After all, I have saved the government money by opting to care for my mother myself.

By: Paul Sagar

Paul Sagar — Thu, 18 Feb 2010 17:51:50 +0000

“Biscuit”

As a general rule, it’s usually wise to actually bother reading the original post before launching into an essay-length tirade, most of the points of which have been countered or addressed in the piece being responded to.

As a general rule.

sangfroid,

It’s not so much about ease – IHT is fairly easy to avoid (at present). it’s more about fairness; why should people receive completely unearned streams of income, tax free? Just because my dad is rich, why should I get his money (which he did nothing to earn) tax-free when he dies? That seems unfair, and unjustifiable in a society that taxes wealth and income transfers.

By: sangfroid

sangfroid — Thu, 18 Feb 2010 17:36:06 +0000

well, simply put, taxing dead people is a far easier than taxing the living, working ones! that is all! i mean, who are all these dead people who mind where their remaining money goes??? the dead are going to work less hard is we tax them more?!

By: biscuit

biscuit — Thu, 18 Feb 2010 17:09:59 +0000

I believe inheritance tax should be removed. Why can’t I leave my money to who i want to leave it with. This gives me more choice. If people believed that they wanted to give their inheritance to government and the government can make better use of it. What makes them from doing so. What is stopping them. They can buy down rain forests to protect them from further destruction. This is free will. I believe in free will rather than policy being slapped on their faces. I don’t believe that the poor should be leeching of from the rich. If the rich wanted to give to the poor they are free to do so. More things should be done to make everyone successful than to make the successful pay for the unsuccessful people. In this world there must be successful people and unsuccessful people. This world should reach an equilibrium where the world’s economy should be a bit near a straight line. More policies should be in place for the better of all of us rather than the better of some of us at the expense of the successful. Do you feel alright if you are stepping on someone’s head to go higher. For some of you i think so.
What motives people to get more than what they can when they will be taxed so much it is not worth. Why do the rich need to work harder when they get taxed so much away anyway. Why would they need to run the company well when they taxed away.
Why would I have a heirloom that is going to tax so much i can’t even keep it. Why would i have to sell the house and land i live in to pay for the tax. Why would anyone work harder when they are not so much rewarded. For me i will laze away at home because if i work harder it wouldn’t belong to me anyway. I will get welfare anyway. Like a test. If i had to stay back if i got 70 marks and above why would i not get 40 marks or even 0 marks. What makes me so that i won’t spend away all my money with my kids. What makes me not want to leave my fortunes in somewhere else. Why can’t we be communist anyway if so. You are taxed for working 40% more would it be worth your effort? There is inequality but i believe the inequality is in the system itself. There are many things . It should be done in a way that doesn’t penalize the those who have toll for it. It shouldn’t be done in a way that takes away someone sweat and blood to those who haven’t earned it as well. I think it would be more useful to tackle exact problems with cost of living and environmental issues first.
The rich isn’t there doing nothing so they got rich. Go out and get rich. It isn’t easy. If they got lotto then they deserve it. If not i dare you to go out and buy lotto and strike. I believe the most of our problem goes to manipulation of property and commodities that increases the cost of living all together. Why you blaming and taxing on the millionaires when not all of them are not doing all of this. I believe in more regulations for some of the industries that are rising the cost of living for everyone namely properties and commodities.

By: F*** Off « Bad Conscience

F*** Off « Bad Conscience — Wed, 10 Feb 2010 10:43:32 +0000

[...] laid out my reasons for opposing the Tory tax cut for millionaires on numerous [...]

By: Making the case? « Bad Conscience

Making the case? « Bad Conscience — Wed, 13 Jan 2010 08:06:44 +0000

[...] course – and as I’ve argued before – impressions on this subject can be misleading. Certainly, the state should respect the [...]

By: Paul Sagar

Paul Sagar — Wed, 18 Nov 2009 09:21:45 +0000

Matje,

It’s not so much to do with parent’s feeling their children need the money to survive, as to do with it being an important part of the parents’ lives going well that, over the course of 30+ years, they can save up and know they are bequeathing something to their children which will outlast themselves.

I think to many parents, that’s an important part of being a parent – and that state must respect that…but only to a certain point, i.e. where wealth disparities kick-in to such a degree that other considerations take precedence, e.g. the wealth inequalities society tolerates.

By: Matje

Matje — Wed, 18 Nov 2009 02:26:17 +0000

“Second: it is important to the lives of people in a free society – both parents and children – that parents be able to leave an inheritance to their children.”

I disagree that it’s important for parents to be able to leave an inheritance to their ‘children’.

Given that in the western world, it’s not untypical for someone to have kids around 30 years old and to have a life expectancy of 80, these ‘children’ will usually be well into their 40s/50s before the death of their parents.

Why then do presumably established middle-aged people need to be given more wealth/privilige/power?

By: Jonas

Jonas — Sun, 23 Aug 2009 11:15:32 +0000

Talking about the luck in someone’s life (especially the luck of inheriting some money or property) I don’t see why this kind of luck deserves such a great attention. Like, this is when luck actually gets in (or doesn’t) in our lives… The whole idea looks to me in the same class as going to the church to admit the sins. It in fact, does not solve anything at all though it makes the society looking much better due to addressing ‘inequality’ (in luck distribution) and taking care about general ‘fairness’ of society. Why do I think so?
First of all, the distribution of luck in the society (any society) starts immediately on birth and not at the time when our parents die. Are kids going to public schools less lucky then the kids whose parents can provide them with private education? I think they are. (Just look at this year’s statistics of grades in UK on which basis universities will pick up students).
How about living in urban slum compared with living in decent suburban environment, not to mention much more opulent living environment? Why do we start caring about ‘luck distribution’ or equality when inheritance time sets in?
I think the reason is that in fact we do not want to do anything real to address the fact that 5% of population controls 60% of society’s wealth. Every rich country has a different set of problems in this regard. But, in one point they are all the same: when the discussion about real change starts (like now in the US about medical and health industry) nothing happens. We then resort to discussing whether it is fair or unfair for parents to leave something to their kids and whether leaving 325,000 of something is fair while 500,000 is grossly unfair and 1,000,000 is totally unacceptable. In the end, it all depends much more on the financial condition of the state and is therefore totally arbitrary. If they need more, they will throw the net out with smaller holes; right?
Secondly, while I am aware of some cases where the whole inheritance had to be sold of to pay such a tax, the inheritor still did not end up begging in the subway. Who really gets busted by this tax is the middle class. In Europe there are whole dynasties (e.g. owners of Opel in Germany) who somehow maintain family ownership through generations. How come they (and their likes) don’t end up paying inheritance tax? The answer to that is irrelevant. What matters is that those who figuratively ‘own’ society have to convince the rest of us that they ‘do care’. And that is how we avoid raising conflict level in society due to general and omnipresent injustice. The subject is instinctively changed and from general injustice we start talking about ‘luck’ (being borne privileged) and how to remedy the problem of ‘too little luck’.
Why would leaving to three kinds a house worth 1,5MM (dollars, pounds or euros) require paying inheritance tax? If all three of them can live in such house with their families, (let’s imagine that for the sake of discussion) is it really because it would be too unfair towards other kids from their generation who had to build or buy their place to live? Or is it because we as a consumer society are just trying to force everyone to spend in order for society to thrive?
This is by the way the same argument as the one that says the family as a basic unit of society fell apart during the second half of XX century because it is better for consumer society to have two consumers (male and female) than only one (a couple).
Inheritance tax IMHO has very little with correcting injustice or introducing a ladle for better distribution of luck. In that sense, it is mostly a fake. Why the state does not cancel the lotto if luck distribution is of such concern?